Manufacturing, wholesale, retail and other entities often use a hybrid automated and manual negotiation process for the sales of goods. With respect to automating the buyer/seller negotiations, stock exchanges such as the NASDAQ have automated systems that conduct negotiation over prices of securities. Also, some organizations use electronic data interchange (EDI) in the sales process.
In particular, negotiation is needed in an environment where advanced orders for goods are taken and the goods are shipped after some combination of manufacturing, distribution, and transportation operations. Fundamentally, advanced orders are taken since the seller has limits on the ability to stock items to be sold to the buyer, such as: storage space; capital required to stock items at a level to where they do not run out; limits on the transportation available between factories, warehouses, and distribution centers feeding items to the point of sale; limits on suppliers of raw parts into the factories; and limits on machine or people constraints within the factories.
Advanced orders and negotiations are used in a number of environments. For example, suppliers of customers under the same corporate umbrella use the ordering and negotiation process to keep corporate inventories low (herein the terms "buyer" and "customer" may be used interchangeably as are the terms "seller" and "supplier"). The process is also used by assemble-to-order operations where the supplier does not know what to build until orders arrive, and by make-to-order operations where essentially the supplier has capacity and waits for a customer to ask the supplier to build something using that capacity. The negotiation between the seller and the buyer is then carried out manually often with misunderstandings as to the state of negotiations and about what agreements have been reached.
Electronic data interchange (EDI) is used as a direct, application-to-application transmission of business documents such as purchase orders, invoices, and shipping notices. EDI relies on the use of standards for the structure and interpretation of electronic business transactions. All trading partners must use a common standard regardless of the information technology (IT) infrastructure involved. In essence, EDI extracts information from applications and transmits computer-readable business documents via a Value Added Network (VAN) or simple telephone lines. At the receiving end, the data can be fed directly into the trading partner's computer system, where it can be automatically processed and interfaced with the receiver's internal applications. EDI is essentially a data format and transport mechanism. EDI does not contain any real intelligence to affect the sales process. Applications executed at each user's end perform any data manipulation or monitoring that might take place.
Electronic negotiation, which is different from EDI, comprises a field of research that has been described as "the process in which two or more parties multilaterally bargain goods or information for mutual intended gain." Beam, Carrie, Arie, Segev, and J. George Shanthikumar, "Electronic Negotiation Through Internet-based Auctions," CITM Working Paper 96-WP-1019. One sub-field of this study has been described in Beam, Carrie, Arie Segev, and J. George Shanthikumar, "Electronic Negotiation Through Internet-based Auctions," CITM Working Paper 96-WP-1019. This article describes agents that are programmed with rules and principles representing the interests of a particular business and carry out negotiation processes with a fellow software agent over "package" deals.